Roshan Padamadan of Luminance Capital presented his thesis on Ageas (Belgium: AGS) at European Investing Summit 2024.
Two Years On: Premium members, scroll down for an automated review of how this thesis played out from October 2024 to October 2026.
Thesis summary:
Ageas is a 200-year-old Brussels-based insurer, founded in 1824 and listed in 2010, serving over 47 million customers in 14 countries across life, non-life and reinsurance. It is the former insurance arm of Fortis, spun off after the financial crisis when Fortis Bank went to BNP Paribas. Belgium remains the core at 35% of 2023 group revenue, while Asia contributes over 40%, with China the second-largest market at 20%.
Roshan notes that Ageas holds strong positions wherever it operates: #1 in life and #2 in non-life in Belgium, top three in Portugal and in UK retail property and casualty, #1 in general takaful in Malaysia, and #3 in life in Thailand. Its rule is to rank at least top five, where scale economics work. Licensing, capital needs and pricing know-how deter new entrants, and life policies are almost impossible to switch, a moat for life insurers.
A flexible brand strategy is central: AG Insurance in Belgium, but joint-venture brands such as Taiping in China, Etiqa with Maybank in Malaysia, Muang Thai in Thailand, and AgeSA and Aksigorta in Turkey. Roshan calls China the crown jewel. Ageas owns nearly 25% of China Taiping, a top-five player serving China’s deep demand for savings, and he expects China eventually to overtake Belgium. The Elevate27 plan targets profitable growth, technical insurance leadership and Asia.
Ageas is mature and needs no fresh capital to grow, so cash flows to shareholders: a dividend yield near 6.7% plus a €200m buyback, over 2% of the €9.2bn market cap, for a combined yield above 8%. Credit ratings are A+ (S&P) and AA- (Fitch). Retail investors own 63%+ after the 2010 IPO, and Fosun is the second-largest holder at 5.4%. Management is decentralized: joint ventures make local decisions, with Ageas represented on their boards.
At €48 on October 22, 2024, Ageas traded at 0.95x book and 0.85x sales. Roshan expects at least 8% from dividends and buybacks in the coming year, 5-10% further upside, and 10-15% long-term growth, with falling rates likely to re-rate a bond-like equity. Risks include a European recession, though non-life bounces back quickly, competition in markets where Ageas is not #1, and thin trading in the US ADR (AGESY).
Disclaimer
European Investing Summit 2024 was held from October 29 to 31, 2024. The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.
